While the company showed impressive year-over-year growth and easily topped consensus estimates, last year's Q1 was a down quarter. Compared to fiscal first-quarter numbers from two years ago, Microsoft had a 29 percent increase in earnings and revenue growth of 7.6 percent.
Further, the company said the recent quarter's results included a deferral of $1.47 billion in revenue related to the Windows 7 Upgrade Option program and sales of Windows 7 to OEMs and retailers before general availability in October 2009. Excluding the deferral, revenue growth was 12.6 percent over the year-ago quarter and earnings were up 19 percent. Still healthy, but not quite as eye-popping.
Microsoft's results were driven by strong sales of its Windows 7 operating system and Office 2010. The company's Windows division showed a 66 percent gain in revenue to $4.8 billion from $2.9 billion over last year's Q1 and a profit of $3.3 billion. Microsoft's business unit had revenue of $5.1 billion, up 13 percent from last year's $4.5 billion, and a profit of $3.4 billion.
Together, the Windows division and business unit (which includes Office products) comprised 61 percent of Microsoft's revenue.
The only unit that lost money was the company's Online Services Division, which recorded a net loss of $560 million on revenue of $527 million, thanks in part to higher revenue costs related to Microsoft's Yahoo search agreement and increased R&D expenditures. However, that OSD operating loss was less than the division's operating loss in the fiscal 2010 fourth quarter ended June 30.
The other big loss came from corporate-level activity, which showed an operating loss of $1.05 billion, up 23 percent from last year's Q1 loss.
Microsoft reaffirmed operating expense guidance of $26.9 billion to $27.3 billion for the full year ending June 30, 2011.
Through Thursday's market close, Microsoft shares were down 13.8 percent this year.

Chris Nerney writes about the business side of technology market strategies and trends, legal issues, leadership changes, mergers, venture capital, IPOs and technology stocks. Follow him on Twitter @ChrisNerney.